In the State of Illinois, all construction projects for state and local governments, including school districts, counties, and public authorities, are subject to prevailing wage laws. Under those laws, contractors must provide a set wage and provide a set rate for benefits, as determined by the Illinois Department of Labor. These rates vary depending on location, trade, and occupation. Contractors placing bids on public construction projects can compete on several dimensions, but not on the wage that they pay workers.
Illinois is not alone. The federal government, 32 states, and the District of Columbia all have prevailing wage laws for at least a portion of projects funded by public dollars. Illinois’ prevailing wage law went into effect in 1941, around the time when many other states adopted their prevailing wage laws. In Illinois, the prevailing wage is set by county, with the Illinois Department of Labor determining the wage and benefits rate based on a review of contracts and bargaining agreements that cover construction work in that county.
The Illinois chapter of Associated Builders and Contractors, Inc., commissioned Anderson Economic Group to estimate the portion of construction expenditures by school districts and higher education institutions in Illinois that are attributable to the state’s prevailing wage law. In this report, we estimate the increase in annual costs due to this law, based on an estimate of the average annual increase in costs on construction projects performed in the years 2002 to 2011.